Rate Update May 29, 2009

Fixed Mortgage Rates are slightly down from yesterday.

Mortgage Backed Bonds were able to bounce off of the 200 day moving average this morning after this week’s freefall.  Earlier this week bonds were able to break through about every level of support on it way to losing over 300 basis points so those very same floors of support will now become ceilings of resistance as bonds try to make their way back.

As you can see, mortgage rates are now well above 5.00% for the first time in about 7 months.  This is not good news for the Feds as they attempt to keep mortgage rates low to ignite refinances and purchases.  It is thought by many analysts that the Fed may soon announce plans to increase the Mortgage Backed Securities purchase program to give bond prices a boost.  The last couple times announcements were made like this, bonds increased heavily and rates remained low.  Don’t expect rates to fall back to 4.5% or lower though…in order to do this, the Fed would have to start buying very low coupon bonds (like 3-3.5%)…as of now, they have concentrated solely on 4-5.5% bonds.  On that note, this past week the Fed purchased $25.5 Billion in mortgage backed securities (all within the 4-5.5% range).

Current Outlook: Cautiously floating as bonds are bouncing off the 200 day moving average.